Ensuring Compliance with the CFPB Proposed Rules
After decades of the industry requesting regulatory clarity and updates to the FDCPA, the CFPB took a leap forward with its release of the Notice of Proposed Rulemaking. Recognizing the uncertainty this can cause for your organization, RevSpring’s experts – led by Chief Compliance Officer and General Counsel Rob Horwitz – have been diligently reviewing the proposed rules. We applaud the CFPB’s efforts to attempt to clearly define the “rules of the game” for stakeholders. We are hopeful that once effective, clear rules will enable a better financial experience for consumers and better outcomes for everyone involved.
Here are some of the key items Horwitz suggests debt collectors, servicers and creditors should pay close attention to:
Email and Text
Over the past 20 years, many consumers have shifted their preference from paper to electronic communication. While nothing in the FDCPA expressly prohibits electronic communications, third-party disclosure and other concerns have limited the use of such communications. The proposed rules provide a safe-harbor for third-party disclosure issues under the FDCPA and allow for mandatory written disclosures (e.g., the first/1692g notice) to be sent electronically under certain conditions. RevSpring’s product experts are reviewing the rules in conjunction with Horwitz and we will provide a more detailed analysis in the near future.
The proposed rule includes a model notice/validation letter, which includes a “tear off coupon” to allow the consumer to pay or dispute the debt and return it to the debt collector. Using the model letter will create a safe harbor for agencies to send a validation notice without fear of a lawsuit over whether the notice complies with the requirements of 1692g of the FDCPA. Once the rule is finalized, RevSpring will create a template following the model letter which will be available for use by all clients. You can view the model letter here.
The proposed rule prohibits furnishing an account to the credit reporting agencies without first communicating with the consumer about the debt.
Out of Statute and Other Disclosures
The proposed rule would prohibit a debt collector from suing or threatening to sue on a debt if the debt collector knows or should know that the applicable statute of limitations has expired. The “knew or should know” standard removes the strict liability aspect from the FDCPA (i.e., if the applicable statute of limitations is determined to have expired, the debt collector would be liable subject to the narrow application of a bona fide error defense for a mistake of fact) and is a recognition that calculating which statute of limitations applies to a given debt is a complex determination. The status quo remains regarding the use of out of statute disclosures. The proposed rule neither requires them nor provides that they are not necessary to avoid a misleading communication.
Your organization will need to retain records to demonstrate compliance for three years after a consumer communication has occurred or the account is transferred.
It is important to note that this is only a proposed rule with a 90-day comment period and the comments could lead to a proposed amended rule. Even if the proposed rule is accepted without changes and becomes a final rule, the proposed effective date is one year from the publication date. This means that a new rule might take effect, at the earliest, at the end of 2020.
We recognize that engaging consumers to meet their financial obligations under strict compliance regulations, legal challenges and cost pressures isn’t easy. RevSpring continues to support your organization in your pursuit of providing exceptional, compliant service and a positive experience for consumers in a complex regulatory environment. As we continue to review the proposed rules, we will ensure our products and services meet the requirements, enabling your organization to continue reaching your business goals while remaining compliant.